Rupee inches up on share gains; dollar eyed

Rupee inches up on share gains; dollar eyed

Mumbai: The Indian rupee nudged up on Wednesday morning, boosted by dollar selling from custodian banks looking to buy shares in the local market, but the US unit’s gains versus major currencies is seen limiting a sharp rise.

At 11 a.m., the partially convertible rupee was at 46.38/39 per dollar, stronger than its 46.445/455 previous close. On Monday, the unit had risen to 46.2650 intraday, its highest since 10 Aug.

“There is no selling interest in the market. There is good rupee buying from custodian banks as stocks are also higher. I think the 46.30-46.50 range should hold for today," said Ashtosh Raina, head of foreign exchange trading at HDFC Bank.

Indian shares were trading 0.9% higher, with Reliance Industries and outsourcers leading the rise, amid mildly positive Asian markets.

Foreign funds have already bought shares worth $14.3 billion so far this year, in addition to last year’s record $17.5 billion purchases. A widening interest rate differential between India and other major economies is further likely to attract flows.

“Think exporters are also coming back—given poor trade and current account deficit data the last few months, the market is not positioned enough for rupee strength," said Ananth Narayan G., head of fixed income, currencies and commodities for South Asia at Standard Chartered Bank in Mumbai.

“So when rupee weakness seems like a struggle, especially with anecdotal capital inflows, strengthening yuan, etc., and given attractive forward levels, some exporters seem to be coming back," he added.

One-year onshore dollar premium was at 219.25 points versus its previous close of 215 points as market expects another 25 basis points hike in rates at Thursday’s policy review.

Most economists expect the central bank to raise its key policy rates by 25 basis points each at the review, but they have trimmed expectations for subsequent rate hikes, a Reuters poll showed on Tuesday.

The index of the dollar against six majors was 0.7% higher. Most Asian currencies were weak against the US unit.

One-month offshore non-deliverable forward contracts were quoted at 46.57, weaker than the onshore spot rate.

In the currency futures market, the most traded near-month dollar-rupee contracts on the National Stock Exchange and MCX-SX were both at 46.4725, with the total traded volume on the two exchanges at about $1.5 billion.